Construction priorities are undergoing a fundamental shift, driven by a dynamic mix of https://bestfitnesstores.com/category/software/ social, economic, technological, geopolitical, and policy developments, affecting both demand and project economics (figure 2). Many mid-market builders are incorporating tariff-adjustment or escalation clauses to pass cost increases directly to project owners.13 Where such clauses are absent, contractors operating under fixed-price agreements bear the full impact of tariff-related cost pressures, often resulting in project delays or redesigns. According to a survey by Autodesk, nearly half of E&C firm executives classify their supply chains as “fragile due to geopolitical tensions,” a figure that continues to rise.11 In response to these challenges, E&C firms are shifting from ad hoc procurement to more systematic approaches. Elevated costs are also affecting both ongoing and future projects—with an 88.2 % YoY increase in project abandonment activity for August 2025; this has led developers to revisit budgets and adjust financial projections.9 Industry research indicates that increased tariffs on building materials like lumber could pose additional challenges to affordability.10 The E&C industry enters 2026 confronting rising material costs, persistent labor shortages, and shifting project demand.
Some of that might be due to businesses not making decisions about going forward with construction projects.” “We’re seeing a long-term slowdown in employment in the construction industry,” says Dodge’s Gaus. Construction firms continue to compete aggressively for workers through wage increases.
“The housing market in the South and mostly the Midwest are doing pretty well,” but significant shortages persist in expensive urban markets like California, New York, Chicago and Boston, he explains. “We are actually pulling back our forecasts of single-family housing because we don’t see as many units needed five years from now,” he says. Mortgage rates hover between 6.5% to 7%; home prices are historically elevated, and growing recession risks combined with a weakening labor market have caused many potential buyers to delay purchases. The single-family housing market faced significant headwinds in 2025, with construction remaining underwhelming due to persistent affordability challenges. However, Gaus notes that single-family housing “has been coming down quite a bit throughout the year,” while multifamily “has remained relatively strong” with good pipeline indications continuing into 2026.
Shifting priorities: Growing focus on data centers and energy infrastructure to drive E&C’s next wave
He understands and has insight into the trends that can impact highly engineered product manufacturing companies and help drive performance improvements. As AI integrates into everyday workflows, firms can see improvements in cost estimation, risk management, and decision-making, helping them to anticipate and resolve issues before they escalate. On construction sites, automation will become increasingly visible, partially addressing labor shortages, enhancing safety, and improving performance. AI-driven tools will optimize designs, automate calculations, and manage schedules in real time, enabling smarter https://gocanadanews.com/hospital-of-the-future-in-ukraine.html and faster project outcomes.
- The commercial sector outlook is about on par with the broader industry, with a projected 1.5% increase this year rising modestly to 3.9% in 2026.
- This change is driven by the explosive growth in AI and hyperscale computing, which are altering labor and resource allocation across the industry.
- The industry’s demographics pose an additional challenge as nearly one-fifth of the construction workforce is over 55.
- By 2031, 41% of construction workers are expected to retire, while only 10% of current workers are under 25, signaling a critical shortage of younger talent entering the field.24 Interest in construction careers remains tepid, with only 7% of potential job seekers considering this field.
Evolving tariffs: Building resilience against supply chain disruptions and rising material costs
Dodge gives enterprise teams the forecasting, historical data, and competitive visibility to size markets, plan investments, and grow with confidence. Jason Ma is the weekend editor at Fortune, where he covers markets, the economy, finance, and housing. The show transforms Fortune’s trusted reporting into actionable, conversational, and entertaining insights for an emerging class of business leaders. Farley also warned the U.S. has overlooked the labor needed to build and sustain data centers and manufacturing facilities. Such forecasts contrast with recent speed bumps in the broader labor market.
Construction costs through mid-2026 are running above the forecast range JLL established in November, with anticipated relief mechanisms gone from the outlook. Planning data shows multifamily will remain strong through the rest of 2025 and into 2026. Looking beyond 2025, slower immigration rates will further constrain household formations and overall housing demand, contributing to the subdued growth trajectory. Dodge forecasts single-family housing construction will finish 2025 down 5% to 909,000 units, followed by only marginal improvement of 0.9% to 917,000 units in 2026.
Central Oregon’s Redmond Municipal Airport undergoes a $180 million expansion
While tech giants stoke construction demand, President Donald Trump’s immigration crackdown has largely cut off the flow to a traditional pool of workers for the sector. In fact, just days after the ABC report, quarterly reports from AI hyperscalers stunned Wall Street with jaw-dropping capital expenditure forecasts for 2026. If spending forecasts prove to be overly conservative, then the industry will need even more workers, Basu said. But despite the AI infrastructure boom, the majority of new-worker demand this year is due to retirements instead of increased need for construction services, he added.
Labor constraints are structural, not cyclical, and geographically locked
Lokar encouraged businesses to be geographically specific in their planning, noting that population growth and regional dynamics will play a critical role in shaping demand. As of mid-2025, the data suggests that the economy is entering a phase of recovery, with industrial production expected to grow modestly through 2026. Lokar’s message is clear—don’t let headlines and political distractions cloud your strategic vision. “If you want to protect your profitability, you have to be absolutely ruthless in terms of controlling costs this year and next year,” says Guckes. The key to navigating these economic headwinds, says Guckes, is being ruthless in controlling costs.
What the 2026 Construction Market Outlook Means for Owners and Developers
“Construction is spending more to entice people to come and work in construction and stay in the field,” says Simonson, with average hourly earnings staying “above a 4% increase for several years now.” However, firms appear hesitant to expand their workforce, as hiring rates remain near historic lows and job openings have “plunged” by 38%. Beyond construction specifically, Dodge says increased ICE enforcement has significantly altered projections for household formation, which has been primarily driven by immigrant rather than domestic https://www.sdilej.net/2023/09/29/a-10-point-plan-for-without-being-overwhelmed/ population growth. The construction industry entered 2025 with strong momentum driven by major government investments like the Infrastructure Investment and Jobs Act and CHIPS Act, along with substantial private-sector spending on data centers for cloud and AI infrastructure.
The Data Tells the Story: Construction, Inflation, and Opportunity
- In fact, just days after the ABC report, quarterly reports from AI hyperscalers stunned Wall Street with jaw-dropping capital expenditure forecasts for 2026.
- In megaproject markets, the pressure is sharper as data centers, semiconductor facilities and advanced manufacturing compete for the same specialty trades.
- Additionally, the migration of engineering talent to technology firms—driven by demand for tech-enabled skills—is intensifying competition for skilled workers.25
- Finally, longer-term demographic trends are not favorable for education construction.
- Business investment in construction structures is projected to pivot from a 2025 decline in funding to modest growth (nearly +1.8%) in 2026, with AI-related data center outlays continuing to support engineering and construction work.
- By focusing on the data—not the noise—businesses can position themselves for resilience and growth.
“Failing to do so will worsen labor shortages, especially in certain occupations and regions, placing further upward pressure on labor costs,” ABC Chief Economist Anirban Basu warned in a statement. The latest news, insights and opportunities from global commercial real estate markets straight to your inbox. Get in touch with our research team to find out how we can support your real estate technology strategy with market insights and strategic advice.
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